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In an agreement between Pueblo County and the Pueblo West Metropolitan District (PWMD), a newly proposed excise tax on retail marijuana will be decided in the upcoming November 3rdelection. An excise tax is a tax imposed on the production of a specific good before it is sold commercially. The proposed excise tax, if passed, will have several different effects on the community of Pueblo West.

As a result of the excise tax, all of Pueblo West’s fifteen marijuana cultivation facilities (as well as the three additional facilities projected in 2016) would be required to pay a 1% excise tax on production starting in fiscal year 2016. This tax would then increase to 2% in 2017 before capping at 3% in 2018. This excise tax would only be collected from marijuana cultivation facilities within Pueblo West’s boundaries and would not impact all citizens of Pueblo West, but only those who grow, distribute, and purchase retail marijuana.

It is estimated that the proposed excise tax will bring in approximately $200,000.00 or 3% of the District’s general fund spending in 2016. It is further estimated that excise tax revenues will generate upwards of $500,000.00 in 2017 and $750,000.00 in 2018. These funds would constitute a large chunk of the District’s total budget and would serve as a way to fund community improvements within Pueblo West.

Unlike Pueblo County, Pueblo West is constrained by law (Title 32 of Colorado Revised Statutes) in its spending of retail marijuana excise tax revenue on only those services outlined in the District’s approved service plan. These services include improvements and maintenance to streets and roads, expansion and improvements to parks and recreational opportunities, and enhancing fire and emergency medical services.

How would marijuana growers absorb the proposed tax? It is likely that retail marijuana (not medicinal marijuana) would increase in price, causing consumers to fork over more cash than they currently do. Even though the excise tax is designed to tax distributor’s wallets, the effect would likely be passed down to retail marijuana customers.

Why would someone pay an increased amount at a retail facility when they could obtain the same product from a black market dealer at a lower price? Many fear that increased prices may lead customers to pursue more illicit avenues in their quest for marijuana, mainly through the black market. Although this is a possible scenario, Pueblo West’s proposed excise tax recommends a low initial tax of 1% in the first year and slow incremental implementation over 3 years to allow for market adjustments.

If approved by Pueblo West voters, the timing of the proposed excise tax would coincide with a simultaneous 2% reduction in retail marijuana sales tax by the State of Colorado in July 2017. This means that the consumer cost of retail marijuana would see a 2% sales tax reduction in the second year of Pueblo West’s proposed excise tax implementation.

It is important to note  that as a Special District, Pueblo West receives no direct revenue from sales tax collected within our boundaries. The State of Colorado (2.9%) and Pueblo County (1%) are the only government entities that receive sales tax within Pueblo West. Pueblo West instead depends on a comparatively low 20 mills in property tax revenue and services and facility fees to support the local community.

While the reach of the excise on marijuana is undoubtedly far, it is up to the citizens of Pueblo West to determine just how far it will go. Voters have the final say on whether or not the tax is levied on November 3rd, and all are encouraged to have their voice heard on Election Day.

6 thoughts

    1. Thanks for your comments Mr. Sawyer. We would be interested in getting feedback on what your expectations are for local services and programs in Pueblo West? In the coming months we will be surveying Pueblo West residents to determine what our community priorities and vision will look like.

      As you are aware, Pueblo West does not levy a sales tax on the community and has one of the lowest property tax mill rates for metro districts in the entire State of Colorado. With these very limited funds, the District has the ability to maintain, but not expand services and infrastructure as the community continues to grow beyond a population of 30,000 residents. Despite these limitations, we are dedicated to providing responsive and quality services to the Pueblo West community at the lowest possible cost.

      To be clear, Pueblo West’s proposed excise tax would only be collected from marijuana cultivation facilities within Pueblo West’s boundaries and would not impact all citizens of Pueblo West, but only those who grow, distribute, and purchase retail marijuana.

      Thanks and have a great weekend!

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  1. While I generally agree with Mr. Sawyer, there is often waste even in small local governments, my concern is more about the level to which a single product is being taxed. I’m not so sure that a 1-3% excise tax will create a black market, however the increased taxation may eventually drive producers to locations where they can decrease their operating costs (i.e. outside of the metro district).

    The district does have a pretty bad record of spending money poorly, examples like chip sealing the heaviest traffic roads rather than using more proven durable materials, or purchasing an eight-story quint for the fire department when nothing in the area is over two stories. For reasons like this, it’s understandable why the residents would not be too quick to throw more money at the problems.

    The other side of the coin is that every other governmental division is getting a part of this pie that the voters helped create, why shouldn’t some of the benefits come to our little “town”?

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    1. Thank you for your comments Bill,

      As the article reveals, the timing of the proposed excise tax would coincide with a simultaneous 2% reduction in retail marijuana sales tax by the State of Colorado in July 2017. This means that the consumer cost of retail marijuana would see a 2% sales tax reduction in the second year of Pueblo West’s proposed excise tax implementation. Additionally, the low initial tax of 1% in the first year and slow incremental implementation over 3 years would allow for market adjustments.

      To answer your concerns on how current funds are being spent, I would highlight that that the District is constrained to using chip seal because using asphalt overlay would be significantly more expensive than our current revenues can support. Chip seal costs 80% less than the cost of asphalt overlay and it extends the life of our current road infrastructure by up to 5-7 years.

      Furthermore, we currently do not have additional revenue to expand asphalt overlay to other roads within the District. We are constrained by the limited Highway Users Tax Fund (HUTF) funds that we receive each year from Pueblo County. We currently service over 420 miles of roads and receive approximately $1.3 million in HUTF funds from Pueblo County each year. If we were to use that $1.3 million dollars in HUTF funds to emplace additional asphalt overlay, we would only be able to overlay 10 miles per year and would have to significantly reduce our other annual road maintenance projects.

      Additionally, with each new mile of asphalt overlay, we incrementally increase our long-term maintenance costs when we need to replace the road at the end of its life cycle. In order to extend the life of our existing roads, we use chip seal, because it provides the best cost benefit for our limited funding. In essence, it allows the District to do more with the limited general fund revenues we have to spend on our service plan.

      Lastly, we have formally requested assistance from Pueblo County on additional road projects, but approval for those projects are subject to appropriations and Pueblo County budget priorities.

      Thanks again for your comments and we look forward to engaging you on additional issues in the future.

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  2. Where are you planning on utilizing the road funding? The waste of funds on McCullough and Purcell tend to make your residents leery of the planned usage. By waste of funds, I use as my examples… Decorative curved center dividers where simple islands would be practical. ADA accessible corners with no concrete sidewalks attached (perhaps the funds for that center divider could have been better used on sidewalks to those corners.)

    The article stated there was an “agreement” between Pueblo County and PWMD. What did PWMD get as part of that agreement? What did the county receive? If Pueblo County is receiving any of this excise tax is the County planning on adding one for growers in their area of control and are they reciprocating to PWMD?

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    1. Thanks for your comments Dave,

      Prioritizing our limited HUTF funds is always a very contentious issue. Residents traditionally advocate for the roads that directly access their homes, but the District attempts to address road maintenance based on scoring, road lifecycle timelines, long-term and recurring maintenance requirements, and immediate safety hazards.

      Public comments and board decisions also play a part in the prioritization and distribution of those limited funds for road and street maintenance. Because of limited funding, the recommended course of action is to triage the roads that need the most immediate maintenance through a scoring system.

      To be clear, not all of the road work that you see completed within the boundaries of Pueblo West is paid for with Pueblo West HUTF funds. Pueblo County, private businesses, and CDOT also fund road projects within our boundaries. The vast majority of HUTF funds are spent on only maintaining our existing streets and roads without the frills you described. There are just not enough HUTF funds to spend them in an inefficient and frivolous manner.

      HUTF funds are distributed to Pueblo West from Pueblo County through an Intergovernmental Agreement based on the miles of roads that the County accepts as meeting their standards. Those are the only direct funds Pueblo West receives from the County for roads during the year.

      To answer your last question, ballot Initiative 5a (Pueblo West’s proposed excise tax) will only go to Pueblo West and can only be spent on services and programs within our service plan. As the article describes, those services include: improvements and maintenance to streets and roads, expansion and improvements to parks and recreational opportunities, and enhancing fire and emergency medical services.

      Thanks again for your comments and we look forward to future discussions.

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